Michael Kogan, et al.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19366 / September 8, 2005
Securities and Exchange Commission v. Michael Kogan, et al., Civil Action No. 05 CV 4805 (CRW) (E.D. Pa.)
COMMISSION CHARGES MICHAEL KOGAN AND ERIC J. LAUCIUS WITH FRAUDULENT SCHEME
The Securities and Exchange Commission ("Commission") announced that on September 8, 2005, it filed a civil action in the United States District Court for the Eastern District of Pennsylvania against Michael Kogan, who is currently incarcerated, and Eric J. Laucius, of Fort Myers, Florida. Kogan was the founder and president of Kogan & Company, Inc., an unregistered entity that purportedly engaged in day trading. Laucius was the founder, president, and chief executive officer of Penn Financial Group, Inc. ("Penn Financial"), a now defunct broker-dealer previously registered with the Commission. Both entities were formerly located in Jenkintown, Pennsylvania. Without admitting or denying the allegations of the Complaint, Kogan and Laucius have consented to the settlement terms described below.
The Commission's Complaint alleges that Kogan perpetrated a fraudulent scheme to misappropriate more than $5.6 million from more than 80 investors who were customers of Penn Financial and Kogan & Company. From as early as 1999 and continuing until March 2003, Kogan, while not licensed to sell securities, falsely held himself out as being associated with Penn Financial to deceive investors into investing funds with him. Laucius aided and abetted Kogan's fraudulent scheme by providing Kogan with access to Penn Financial's facilities as well as its customer accounts. In particular, Laucius improperly provided Kogan with access that Penn Financial had, as an introducing broker, to its clearing broker's computer system, which gave Kogan the means to conduct his scheme.
The Complaint further alleges that, using this access, Kogan engaged in unauthorized transactions while telling investors that their funds were secure. Kogan used the funds he stole to trade in the market, to repay earlier investors, and to pay his own personal expenses. In order to conceal his conduct, Kogan gave investors false monthly account statements purporting to show that their funds had been invested as agreed and were making profits.
The Complaint alleges that Kogan violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and that Laucius aided and abetted violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Complaint seeks permanent injunctions against both defendants, and disgorgement, together with prejudgment interest, and civil penalties against Laucius. Both defendants have consented to the entry of final judgments permanently enjoining them from engaging in the above violations. Laucius has also been ordered to pay disgorgement and prejudgment interest in the amount of $141,669, but payment of all but $90,000 is waived, and no civil penalties are imposed, based on his financial condition. Kogan has previously pled guilty to criminal charges arising out of the fraud described in the Complaint. He is currently serving an 87-month prison sentence and was ordered to pay restitution in the amount of $5.6 million.
Kogan and Laucius have also agreed to Commission Orders barring each from association with any broker or dealer.
